The US dollar experienced a significant decline, reaching a three-month low, fueled by growing anxieties surrounding the potential adverse effects of President Trump’s tariffs on the American economy. The Bloomberg Dollar Spot Index registered a 0.9% drop at midday in New York, marking its lowest point since early December. The euro emerged as a strong performer against the dollar, bolstered by Germany’s announcement of increased investments in defense and infrastructure, surpassing $1.07 for the first time since November.
Analysts suggest that the market is increasingly pricing in the negative impact of tariffs on the US economy. Brad Bechtel, global head of FX at Jefferies, noted that the dollar adjustment is occurring rapidly, with the market anticipating a growth slowdown due to the trade measures. The dollar’s downward trajectory this week coincides with the implementation of US tariffs on Canada and Mexico, exacerbating fears of a global trade war and its potential to depress economic expansion. Concerns surrounding economic growth are leading major central banks to contemplate further interest rate cuts. Swaps currently indicate a projected 73 basis points of easing from the Federal Reserve by year-end, a rise from 66 basis points recorded on Friday.
